Another bank adopts the lower home loan rate set. Borrowers may be smiling but pressures are building for banks to protect their margins and savers should beware

ASB has now joined the move lower in some key carded home loan interest rates.

Following BNZ, Westpac and ANZ, ASB has also adopted 3.79% as its fixed two year 'special'.

And ASB has also fallen into line with a 3.85% rate for a fixed one year term.

After this move, only Kiwibank is not offering a 3.79% two year 'special' (although Kiwibank is the only main bank with a sub-4% rate for three years). Update: Kiwibank has now moved lower.

(China Construction Bank's 3.65% two year rate offer no longer looks such an outlier.)

It is rare that every major bank offers exactly the same rate for their one and two year fixed offerings. It is also somewhat unusual for the mortgage market to be this competitive in winter and before the launch of the spring real estate season. Borrowers could be forgiven for thinking that when the Spring season starts, even more competitive (lower) rates will be rolled out.

These changes come as local wholesale swap rates dip lower again, and yesterday they reached their all-time record low levels and for all durations. It is doubtful that the trend will end here as the drums beat louder for official rate cuts in many economies and the hunt for yield - any yield - drives bond market prices ever higher (and yields ever lower).

Actually, the lower interest rates fall, the more squeezed banks might feel. Most main banks have current overall Net Interest Margins at about 2.2% (Kiwibank is at 2.0%). Westpac's recent wholesale bond issue whopper left them with a cost of 2.22% for that money. Most banks offer just over 3% for a six month to one year term deposit. Mortgage lending is by far the largest component of bank lending and doing new business at 3.79% clearly leaves margins challenged (lend at 3.79%, fund at 2.7% being a simple average of recent wholesale and retail rates, leaves just 1.1% as a crude net interest margin.) Of course, bank treasury management is much more intricate than this simplified example, but all the same, pressure will be building. And as much as customers might think that the historical NIM is too high, banks will move to protect it as much as they can and in the current environment that can only mean lower rates for savers. And likely, quite soon, and certainly if the Spring season brings even lower home loan rates.

See all banks' carded, or advertised, home loan interest rates here.

Here is the full snapshot of the advertised fixed-term rates on offer from the key retail banks.

below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at July 26, 2019	%	%	%	%	%	%	%
ANZ	4.49	3.85	4.19	3.79	4.05	4.85	4.95
	4.49	3.85	3.89	3.79	4.05	4.35	4.45
	4.99	3.85	4.79	3.79	4.05	4.35	4.45
	4.79	3.85		3.85	3.99	4.29	4.39
	4.99	3.85	4.79	3.79	4.05	4.35	4.45
Co-operative Bank	3.89	3.89	3.89	3.89	4.05	4.35	4.45
China Construction Bank	5.15	5.10		3.65	3.90	5.30	5.30
ICBC	4.85	3.85	3.99	3.95	3.89	4.29	4.39
	4.85	3.79	3.79	3.79	3.89	4.19	4.29
	4.99	3.85	3.85	3.85	3.99	4.49	4.49
Incl price match promise	4.85	3.85	3.99	3.79	4.05	4.35	4.45

In addition to the above table, BNZ has a fixed seven year rate of 5.95%.

ASB didn't change any term deposit rates at the same time as this mortgage rate announcement.

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of one-to-five years are here. And term PIE rates are here.